Hive's performance explosion did not help its stock price! It plummeted by 50% Slump to 3.1 USD, urgently pushing for a 300 million increase in issuance.

Hive Digital Technologies launched a new market-priced stock sale plan this week, which will allow the company to sell up to $300 million in stock over the next period, thereby increasing financial flexibility after announcing record quarterly results last week. Despite the company's aggressive expansion, Hive's stock price has fallen to around $3.10, a decline of more than 53% from its peak in October.

The Mystery Behind the Record-Breaking Performance and the Stock Price Halving

Hive's latest quarterly performance reflects this strategy. Revenue increased by 285% year-over-year to $87.3 million, while Bitcoin production grew by 77% compared to the previous quarter, reaching 717 Bitcoins. Such explosive performance is extremely rare among mining companies, and the 285% revenue growth implies that the company's scale has nearly quadrupled within a year. The 77% quarterly increase in Bitcoin production also indicates Hive's mining capacity is expanding rapidly.

However, the market's reaction to such impressive performance has been extremely lukewarm. Despite the company's aggressive expansion, according to The Block's pricing page, Hive's stock price, which reached a three-year high of $6.60 at the beginning of October, has fallen to around $3.10, a decline of over 53%. The stark contrast between the stock price being halved from its peak and the record performance creates a significant paradox that needs explanation.

Possible reasons include: market concerns that Hive's expansion is too rapid, and a surge in capital expenditures may erode profits; Bitcoin price falling from $126,000 to around $90,000, with mining company stock prices typically following Bitcoin's fluctuations with higher leverage; uncertainty in the return on investment for AI infrastructure, leading investors to question whether the strategy of shifting from mining to AI is wise; the overall cryptocurrency stock sector is under pressure, with companies such as Coinbase, Riot, and Marathon experiencing similar declines in stock prices.

A deeper reason may be the investors' concerns about Hive's plan to issue an additional 300 million USD. The issuance implies equity dilution, and the shareholding ratio of existing shareholders will be diluted. The scale of the 300 million USD issuance is extremely large relative to Hive's current market value of approximately 300-400 million USD, potentially leading to an equity dilution of over 50%. This dilution pressure may be the main reason for the sharp decline in stock prices.

Hive Latest Quarterly Performance Highlights

Revenue: 87.3 million USD (year-on-year increase of 285%)

Bitcoin Production: 717 coins (Quarterly increase 77%)

Stock Price: fell from $6.60 to $3.10 (fall of 53%)

Issuance Plan: Up to 300 million USD in stock issuance

Dual Engine Strategy: Bitcoin Mining Supports AI Expansion

Hive is ramping up its efforts to develop infrastructure centered around artificial intelligence, including plans to build a new data center park in New Brunswick, Canada, designed to accommodate over 25,000 GPUs. The “dual engine” strategy, where miners leverage Bitcoin mining cash flow to fund the construction of large-scale computing, is becoming an increasingly important component of its growth.

The executives described the strategy as a “dual-engine” model, leveraging Bitcoin mining revenue to accelerate the establishment of super-large-scale computing capabilities. This strategic shift reflects the real challenges facing the Bitcoin mining industry. As Bitcoin halving reduces block rewards, mining difficulty continues to rise, and electricity costs remain high, the profit margins for pure mining operations are narrowing. In contrast, the AI computing service market is experiencing explosive growth, with GPU rental prices far exceeding mining revenues.

At the beginning of this month, the company purchased a 32.5-acre plot of land in Grand Falls, New Brunswick, to build a renewable energy data center park that can accommodate over 25,000 GPUs. This scale is considered large in commercial GPU clusters, sufficient to support the training or inference tasks of multiple large AI models. The choice of Canada as the location for the data center may be due to its abundant hydroelectric resources (renewable energy) and relatively low electricity costs.

The company stated that as miners position themselves as infrastructure providers for artificial intelligence workloads, its high-performance computing division BUZZ HPC is becoming an increasingly important growth driver. BUZZ HPC is the AI computing services division established by Hive, offering GPU leasing, AI model training, and high-performance computing services. The rapid growth of this division indicates that Hive's strategic transformation is making progress.

From a business model perspective, the dual-engine strategy is complementary. Bitcoin mining provides a stable cash flow, which is used to purchase GPUs and build data centers. AI computing services offer higher returns, but require significant upfront investment. The combination of both allows Hive to expand its business without relying on external financing (at least in an ideal scenario). However, the launch of the $300 million issuance plan indicates that relying solely on mining cash flow may not be sufficient to sustain Hive's expansion pace, and external financing remains necessary.

Use of funds for the additional issuance of 300 million USD and dilution risks

The “Shelf Registration Plan” allows Hive to sell shares at market prices through banks such as KBW, Stifel, and Cantor Fitzgerald when needed. Hive is not obligated to use this plan, which will continue until the company reaches a funding cap of $300 million or decides to terminate it. This flexibility is the core advantage of shelf registration, as the company can issue shares when prices are relatively high and pause when prices are low.

The launch of this service is part of Hive's ongoing strategy to advance artificial intelligence and high-performance computing infrastructure. The $300 million funding will primarily be used for: purchasing and deploying over 25,000 GPUs, building a new data center campus in New Brunswick, upgrading power and cooling infrastructure, and potential strategic acquisitions or partnerships.

However, what investors are most concerned about is the issue of equity dilution. Based on the current stock price of $3.10, a $300 million issuance will add approximately 96.77 million shares (300,000,000 / 3.10). If Hive currently has about 200 million shares outstanding (assumed value, actual numbers need to be checked in company documents), the total will reach about 297 million shares after the issuance, resulting in a dilution ratio of approximately 32.6%. This means that the ownership percentage of existing shareholders will be diluted by about one-third, and both earnings per share and net assets per share will correspondingly decrease.

This dilution pressure may be the main reason for the stock price falling from $6.60 to $3.10. The market began to “price in” this dilution expectation before the announcement of the additional issuance plan, leading to a preemptive decline in the stock price. For existing shareholders, this is painful: even with the company's outstanding performance, the equity value still shrinks due to dilution.

From a management perspective, issuing additional shares is a necessary means to achieve expansion strategies. Building a data center capable of accommodating 25,000 GPUs requires hundreds of millions of dollars in capital expenditure, which is difficult to sustain solely through mining cash flow. Choosing equity financing over debt financing may be due to the high cost of debt in the current high interest rate environment. Although equity financing dilutes shareholders, it does not increase financial leverage, thus maintaining a healthy balance sheet.

The AI Transformation Wave in Bitcoin Mining

Hive's strategic transformation is not an isolated case, but rather a trend in the entire Bitcoin mining industry. Major miners such as Riot Platforms, Marathon Digital, and Core Scientific are exploring AI computing services. The logic behind this transformation is clear: miners possess substantial power contracts, data center infrastructure, and operational experience, all of which can be utilized for AI computing. Transitioning from mining Bitcoin to renting GPUs only requires a hardware change and adjustments to the business model.

However, this transformation also faces challenges. The AI computing market is highly competitive, with cloud giants like AWS, Azure, and GCP dominating the landscape, while specialized GPU cloud service providers such as CoreWeave and Lambda Labs are also rapidly expanding. As a new entrant transitioning from mining, can Hive establish a foothold in this market? Can its BUZZ HPC division compete with these established rivals? These are all questions that investors are concerned about.

From the perspective of market demand, the demand for AI computing is indeed exploding. AI companies like OpenAI, Anthropic, and Mistral have an almost unlimited need for GPUs and are willing to pay high prices to rent computing power. If Hive can successfully transform, its revenue and profits could increase significantly. However, the entry barriers to this market are also rising rapidly. The latest H100 and H200 GPUs are expensive and in short supply, data centers need to meet extremely high power and cooling standards, and customers have strict requirements for service reliability and security. Hive needs to prove that it can meet these requirements.

From an investment perspective, the share price of Hive has significantly declined after experiencing a 53% fall. If its AI transformation strategy is successful, the current price may present a buying opportunity. However, if the transformation fails or the $300 million issuance severely dilutes shareholder value, the stock price may fall further. Investors need to closely monitor the revenue contributions from the BUZZ HPC division, the construction progress of new data centers, and the actual issuance scale and timing.